KIMMEL_Acct_2e_ProblemCSolutions_ch06

Accounting: Tools for Business Decision Making

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Unformatted text preview: SOLUTIONS TO PROBLEMS PROBLEM 6-1C (a) Include $800 in inventory. The goods should be included in inventory as they were shipped FOB destination and were not received by the customer until April 1. Title to the goods transfers to the customer April 1. (b) Include $420 in inventory. The amount should be included in inventory as the goods were shipped FOB shipping point March 28. Farrell, the buyer, owns the inventory as soon as it is shipped. (c) Exclude the goods from Farrell’s inventory. The consigned goods are owned by Joyce Inc. No entry is recorded. (d) Include $380 in inventory. (e) Exclude from inventory as the goods were shipped FOB destination and not received until April 3. The seller still owns the inventory. No entry is recorded. (f) The returned goods should be included in inventory and removed from cost of goods sold at $400. Sales returns and allowances should be increased and accounts receivable reduced by $640. 6-1 PROBLEM 6-2C (a) COST OF GOODS AVAILABLE FOR SALE Date Explanation Units Unit Cost Total Cost June 1 Beginning inventory 1,200 $3 $ 3,600 3 Purchase 3,000 4 12,000 18 Purchase 7,800 5 39,000 29 Purchase 4,000 6 24,000 Total 16,000 $78,600 (b) FIFO (1) Ending Inventory (2) Cost of Goods Sold Unit Total Cost of goods Date Units Cost Cost available for sale $78,600 June 18 1,500 $5 $ 7,500 Less: Ending 29 4,000 6 24,000 inventory 31,500 5,500 * $31,500 Cost of goods sold $47,100 *16,000 – 10,500 = 5,500 Proof of Cost of Goods Sold Unit Total Date Units Cost Cost June 1 1,200 $3 $ 3,600 3 3,000 4 12,000 18 6,300 5 31,500 10,500 $47,100 6-2 PROBLEM 6-2C (Continued) LIFO (1) Ending Inventory (2) Cost of Goods Sold Unit Total Cost of goods Date Units Cost Cost available for sale $78,600 June 1 1,200 $3 $ 3,600 Less: Ending 3 3,000 4 12,000 inventory 22,100 18 1,300 5 6,500 Cost of goods sold $56,500 5,500 $22,100 Proof of Cost of Goods Sold Unit Total Date Units Cost Cost June 29 4,000 $6 $24,000 18 6,500 5 32,500 10,500 $56,500 AVERAGE COST (1) Ending Inventory (2) Cost of Goods Sold Cost of goods $78,600 ÷ 16,000 = $4.913 available for sale $78,600 Less: Ending Unit Total inventory 27,022 Units Cost Cost Cost of goods sold $51,578 5,500 $4.913 $27,022 * *Rounded (c) (1) As shown in (b), due to rising prices, FIFO produces the highest in- ventory amount, $31,500. (2) As shown in (b), due to rising prices, LIFO produces the highest cost of goods sold, $56,500. 6-3 PROBLEM 6-3C (a) COST OF GOODS AVAILABLE FOR SALE Date Explanation Units Unit Cost Total Cost Jan. 1 Beginning inventory 200 $ 6 $ 1,200 Jan. 24 Purchase 800 7 5,600 Apr. 12 Purchase 400 8 3,200 Aug. 19 Purchase 600 9 5,400 Nov. 30 Purchase 300 10 3,000 Total 2,300 $18,400 (b) FIFO (1) Ending Inventory (2) Cost of Goods Sold Date Units Unit Cost Total Cost Cost of goods available for sale $18,400 Nov. 30 300 $10 $3,000 Less: Ending Aug. 19 100 9 900 inventory 3,900 400 * $3,900 Cost of goods sold $14,500 *2,300 – 1,900 = 400 Proof of Cost of Goods Sold Date Units...
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KIMMEL_Acct_2e_Probl - SOLUTIONS TO PROBLEMS PROBLEM 6-1C(a Include $800 in inventory The goods should be included in inventory as they were

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